Campbell Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell issued $25,000,000 of 10-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $26,625,925. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.*
2. Journalize the entries to record the following:*
a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)
Answers
Answer:
Explanation:
1. CHECK THE FIRST IMAGE ATTACHED.
the cash received from the issuance of bond is debited with $26,625,925. The premium on bonds payable is credited with $1,625,925 and bonds payable is credited with $25,000,000.
Working notes:
Calculation is given below:
Premium on Bonds Payable = Cash − Bonds Payable
=$26,625,925−$25,000,000
=$1,625,925
2a and b. CHECK THE SECOND AND THIRD IMAGE.
It is given to record the semi-annual interest for June-30 and amortization of the premium in the journal entry. The interest expense is calculated by multiplying the interest rate with the value of bonds and dividing it by 2. Since the interest rate is given for one year, to calculate the semi-annual interest rate, only half of the year should be taken. The half of the year can be 6/12 or 1/2. The premium on amortization is calculated by dividing the premium on bonds by 20. Therefore, the calculated amortization premium on bonds payable is $81,296. The interest expense is calculated by subtracting the premium on bonds payable from cash. As per the debit and credit rules, the cash account is credited with $1,250,000, the premium on bonds payable is credited with $81,296, and bonds payable is credited with $1,168,704.
Therefore, the premium on bonds payable is $1,625,925.
The journal entries for Campbell Inc.'s bond issuance and premium amortization were provided, including the issuance of bonds and the first two interest payments. The premium amortization was calculated using the straight-line method.
Explanation:Campbell Inc.'s situation is a typical case in accounting for bonds issuance and premium amortization. Here are the necessary journal entries:
Issuance of Bonds: Dr. Cash $26,625,925, Dr. Premium on Bonds Payable $1,625,925, Cr. Bonds Payable $25,000,000. First Interest Payment (Dec 31, Year 1): Dr. Interest Expense $1,125,000 ([$25,000,000 x 10%]/2), Dr. Premium on Bonds Payable $81,296 ([$1,625,925/20]), Cr. Cash $1,250,000 ([$25,000,000 x 10%] / 2). Second Interest Payment (Jun 30, Year 2): Dr. Interest Expense $1,125,000, Dr. Premium on Bonds Payable $81,296, Cr. Cash $1,250,000
The calculation of the premium amortization is straight line, dividing the total premium by the number of payments over the life of the bond (10 years x 2 payments per year).
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Related Questions
Two economists estimate the government expenditure multiplier and come up with different results. One estimates the multiplier at 0.75, while the other comes up with an estimate of 1.25. Explain why these estimates are different in terms of the assumptions that each economist is making.
A. Compared to the first economist, the second economist is assuming a longer time frame for the effects of the increased expenditure to be observed.
B. Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both.
C.Compared to the first economist, the second economist must be assuming either a larger induced increase in consumption, a smaller crowding out
D. Unlike the first economist, the second economist miust be assuming that the government expenditure is devoted to useful projects.
If the current value of GDP is $14.42 trillion and the government is planning to increase spending by $900 billion (all in one year), the percentage increase in GDP using the multiplier estimate of the first economist is 4.68 percent. (Round your response to two decimal places) Using the multiplier estimate of the second economist and the same current value of GDP, the percentage increase in GDP is percent. (Round your response effect, or both. to two decimal places.)
Answers
Answer: (B)
Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both.
Explanation:
First of all, I'll like to explain some terms:
- Government Expenditure Multiplier is an index or figure showing the percentage by which Gross domestic product (GDP) will increase, when Government Expenditure increases; all other kinds of expenditure held constant
- the GDP equation is
GDP= C + I + G + (X-M)
Where C = consumption expenditure (by individuals)
I = investment expenditure (by firms)
G = government expenditure
(X-M) = international trade (export-import) expenditure
- If we hold other independent variables constant and measure the government expenditure multiplier, we will derive the index that shows the amount by which an increase in G will increase GDP.
Now to the question;
Crowding out effect means an act by the government to purchase so much more domestic goods and services than they previously purchased.
This is done deliberately by the government for various reasons: to boost the economy, to provide social welfare goods, and to kick-start national projects.
It is called "crowding out" because these huge government purchases limit private sector purchases.
If the 2nd economist assumes a larger crowding out effect, that means greater government expenditure, then this rhymes with the higher GM (government expenditure multiplier) that his estimate produces. GM of 1.25 means that a percent increase in G will increase GDP by 25%.
On the other hand, Economist 1's estimate of 0.75 implies a 25% decrease in GDP (coming from a decrease in G), which explains his part of option B. He (economist 1) is assuming a lesser crowding out effect.
If we add the assumption of Economist 2 that there'll be smaller induced increase in consumption, it follows that C will have a less positive impact on GDP.
If we combine both changes in C and G, we also have G producing more increase in GDP.
You are welcome.
Answer:
the correct answer is B
"Compared to the first economist, the second economist must be assuming either a smaller induced increase in consumption, a larger crowding out effect, or both".
Explanation:
Government use multiplier used to show increment in level of GDP when government use increment other than consistent of other consumption.
Gross domestic product = c+I+g + ( x-m)
In the event that we steady all use or free factors expected g which is meant government consumption at that point to compute government multiplier the expansion in g consequently increment in GDP.
Swarming impact:- under this administration buy all the more increasingly residential merchandise and ventures which limits private division buy and this circumstance is gotten swarming out.
So if financial specialist second have bigger swarming exertion implies government use increment and this lead higher government multiplier . Gm of 1.25 implies that percent expansion in g lead GDP increment by 25% .
Financial specialist second gauge 0.75 methods 25% abatement in GDP .
Sherry, a sales representative, is placed in a group with an engineer from operations, a human resource specialist, and a financial manager to develop new uses for one of the company's existing products in order to increase sales. This group is aA. standing committee.B. task force.C. special project team.D. cross-functional team.E. multifaceted work group.
Answers
Answer:
Letter D is correct. Cross-functional team.
Explanation:
A multifunctional team is made up of employees from different functional areas with the objective of enhancing organizational results.
Problem solving and search for innovation are relevant characteristics when choosing to form a multifunctional team in a company, it is believed that each sector has ideas and solutions that together will increase the possibility of effectiveness in activities and processes, besides providing greater integration, collaborative sense of team and resolution of common goals, which consequently drives the results and the organizational revenue.
When they produce 20,000 units per month, Sanders Incorporated has variable costs of $392,000 and fixed costs of $242,000. If Sanders increases their production to 25,000 units, by how much will they have to increase their budget?
A : $98,000
B : $158,500
C : $490,000
D : $792,500
Answers
Answer:
increased in budget = $98000
correct option is A $98000
Explanation:
given data
produce = 20,000 units per month
variable costs = $392,000
fixed costs = $242,000
increases production = 25,000 units
to find out
how much will they have to increase their budget
solution
we get here total cost or present budget that is
total cost = variable cost + fixed cost
total cost = $392000 + $242000
total cost = $634000
and
variable cost per unit will be here
variable cost per unit = [tex]\frac{variable\ costs}{produce}[/tex]
variable cost per unit = [tex]\frac{392000}{20000}[/tex]
variable cost per unit = 19.6
and
variable cost for increased production = increases production × variable cost per unit
variable cost for increased production = 25000 × 19.6
variable cost for increased production = 490000
and
total cost of increased production = fixed cost + variable cost for increased production
total cost of increased production = $242000 + $490000
total cost of increased production = $732000
and
increased in budget = $732000 - $634000
increased in budget = $98000
correct option is A $98000
Moreno Company publishes a monthly sports magazine, Fishing Preview. Subscriptions to the magazine cost $20 per year. During November 2019, Moreno sells 15,000 subscriptions beginning with the December issue. Moreno prepares financial statements quarterly and recognizes subscription revenue at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
(a) Prepare the entry in November for the receipt of the subscriptions
(b) Prepare the adjusting entry at December 31, 2019, to record sales revenue recognized in December 2019.
Answers
Answer:
Explanation:
The journal entries are shown below:
a. Cash A/c Dr $300,000 (15,000 × $20)
To Unearned Service revenue A/c $300,000
(Being unearned service revenue recorded)
b. Unearned Service revenue A/c Dr $25,000 (300,000 ÷ 12 month)
To Service revenue A/c $25,000
(Being the adjusting entry for December month is recorded)
Rise Against Corporation is comparing two different capital structures: an all equity plan (Plan A) and a levered plan (Plan B). Under Plan A, the company would have 210,000 shares of stock outstanding. Under Plan B, there would be 150,000 shares of stock outstanding and $2.28 million in debt outstanding. The interest rate on the debt is 8%, and there are no taxes.a. If EBIT is S500,OOO, which plan will result in the higher EPS? b. If EBIT is $750,000, which plan will result in the higher EPS? c. What is the break-even EBIT?
Answers
Answer:
a. Plan A
b. Plan B
c. $638,400
Explanation:
The formula to compute the earning per share is shown below:
Earning per share = (Net income - interest) ÷ (Number of shares)
a. For Plan A
EPS = ($500,000) ÷ (210,000 shares) = $2.38
For Plan B
EPS = ($500,000 - $182,400) ÷ (150,000 shares) = $2.12
The interest is computed below:
= $2.28 million × 8%
= $182,400)
Plan A has higher EPS
b. For Plan A
EPS = ($750,000) ÷ (210,000 shares) = $3.57
For Plan B
EPS = ($750,000 - $182,400) ÷ (150,000 shares) = $3.78
The interest is computed below:
= $2.28 million × 8%
= $182,400)
Plan B has higher EPS
c. Break-even EBIT
(EBIT) ÷ (Number of shares) = (EBIT - Interest) ÷ Number of shares
(EBIT) ÷ (210,000) = (EBIT - $182,400) ÷$150,000
After solving this,
The EBIT would be $638,400
Bramble Company took a physical inventory on December 31 and determined that goods costing $216,300 were on hand. Not included in the physical count were $22,720 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $19,770 of goods sold to Alvarez Company for $29,450, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Bramble report as its December 31 inventory?
Answers
Answer:
$258,790
Explanation:
Bramble report as its December 31 inventory:
= Inventory in hand as per physical count + Goods purchased from P corporation under FOB shipping basis + Cost of goods sold to A company under FOB destination basis
= $216,300 + $22,720 + $19,770
= $258,790
Therefore, the amount to be reported by Bramble company is $258,790.
The cash budget: Sit Down Corporation has a cash balance of $32,500 on April 1. The company must maintain a minimum cash balance of $30,000. During April, expected cash receipts are $48,500. Cash disbursements during the month are expected to total $56,100. Ignoring interest payments, how much will the company need to borrow during April?
Answers
Answer:
$5,100
Explanation:
Initial cash balance (IB) = $32,500
Expected cash receipts (EC) = $48,500.
Cash disbursements (CD) = $56,100
Amount borrowed (B) = ?
Assuming that the final balance must equal at least $30,000, the cash flow for april is given by:
[tex]\$30,000 = IB +EC-CD+B \\B= \$30,000 -\$32,500-$48,500+\$56,100\\B=\$5,100[/tex]
Sit Down Corporation will need to borrow $5,100 during April to maintain a minimum cash balance of $30,000.
Why, with the monetary policy tools it had used prior to the financial crisis, could the Fed not control the federal funds rate?
(A) The Fed would have needed to conduct a massive open market purchase of government securities.
(B) Investor and consumer behavior was not conforming to normal patterns.
(C) Using the tools the Fed had available would have disrupted the financial system.
(D) Reserves would have needed to be increased by too large an amount.
Answers
Answer:
(C) Using the tools the Fed had available would have disrupted the financial system.
Explanation:
Every time the solution of any problem is not available with the resources we have, rather the available resources might add up to the cost of damage.
In the given case also, this general phenomenon is applicable.
As the Fed had monetary policy tools, which it even used earlier are not good for the problem of financial crisis. That the policies could even turn the situation worse as the country is already facing the crisis, and the policies would not contribute to the well being.
Heller Company offers an unconditional return policy to its customers. During the current period, the company records total sales of $850,000, with a cost of merchandise to Heller of $340,000. Based on past experience, Heller Company expects 4% of sales to be returned. How much in net sales will Heller Company recognize for the current period?
A. $510,000
B. $816,000
C. $489,600
D. $360,400
E. $850,000
Answers
Answer:
B. $816,000
Explanation:
The computation of the net sales is shown below:
= Total sales - sales returned amount
where,
Total sales is $850,000
And, the sales returned amount would be
= Total sales amount × sales returned percentage
= $850,000 × 4%
= $34,000
Now put these values to the above formula
So, the value would be equal to
= $850,000 - $34,000
= $816,000
Six months ago, you purchased 2,700 shares of ABC stock for $44.81 a share. You have received dividend payments equal to $.50 a share. Today, you sold all of your shares for $47.49 a share. What is your total dollar return on this investment?
Answers
The total dollar return on the investment is calculated by adding the total capital gain ($7,236) and the total dividends ($1,350) which results in a total return of $8,586.
The question involves calculating the total dollar return on an investment in the stock market. To determine the total dollar return, we must consider both the capital gain (or loss) and the dividend payments received during the investment period.
First, let's calculate the capital gain:
Sale price per share: $47.49
Purchase price per share: $44.81
Number of shares: 2,700
Capital gain per share: $47.49 - $44.81 = $2.68
Total capital gain: $2.68 \\u00d7 2,700 shares = $7,236
Next, let's calculate the dividend earnings:
Dividend per share: $0.50
Total dividends: $0.50 \\u00d7 2,700 shares = $1,350
Now, we can calculate the total dollar return:
Total capital gain: $7,236
Total dividends: $1,350
Total dollar return: $7,236 + $1,350 = $8,586
Morgan, the best candidate for the position of director of marketing, has tested positive for the presence of illegal drugs in a hair sample. Given this scenario, the HR manager should: Group of answer choices
a. hire Morgan and inform him of the company’s Employee Assistance program.
b. inform Morgan that someone else has been hired.
c. notify Morgan that he was denied the job because of a positive drug test.
d. ask Morgan to submit to a second type of drug test at another laboratory.
Answers
Answer: The correct answer is "d. ask Morgan to submit to a second type of drug test at another laboratory.".
Explanation: Given this scenario, the HR manager should: ask Morgan to submit to a second type of drug test at another laboratory to prove whether Morgan has actually used drugs and evaluate whether it is convenient to hire him or not.
Economics can be described as the study of how people use ________ resources to satisfy ________ wants.A) unlimited; unlimitedB) unlimited; limitedC) limited; unlimitedD) limited; limited
Answers
Answer:
C) limited; unlimited
Explanation:
Economics can be described as the study of how people use limited resources to satisfy unlimited wants.
Economics is the study of how people use limited resources to satisfy unlimited wants, which requires making choices due to the scarcity of resources.
Explanation:Economics can be described as the study of how people use limited resources to satisfy unlimited wants. The correct answer to the student's question is C) limited; unlimited
Scarcity is a core concept in economics, indicating that there is a finite amount of resources available to meet the endless human wants and needs. Resources such as labor, tools, land, and raw materials are essential to produce the desired goods and services but are not available in unlimited quantities. Time is another scarce resource; with only 24 expendable hours in a day, people must make choices about how to allocate their time among work, leisure, and rest.
Because of these limitations, economics studies how individuals and societies prioritize and allocate their resources, making trade-offs to best satisfy the varying wants and needs. Every choice made implies another option foregone, which is known as an opportunity cost.
Bartran Company assembles ink cartridges. Each finished cartridge has three child items: a plastic case, a label and several ounces of ink. Lead time on assembling a finished cartridge is 2 days, while the lead time for procuring new plastic cases is 1 day, although the lead time is 5 days for procuring new labels and 2 days for procuring more ink. Assuming that all the assumptions of an MRP bill of materials is true, how long would it take Bartran to create at least one finished ink cartridge if it started with nothing in stock?
Answers
It would take Bartran Company a minimum of 5 days to create at least one finished ink cartridge if they started with nothing in stock.
Explanation:Using the information given, we can determine the lead times for each component and calculate the total lead time to create a finished ink cartridge. The longest lead time comes from procuring new labels, which is 5 days. Therefore, it would take Bartran Company a minimum of 5 days to create at least one finished ink cartridge if they started with nothing in stock.
Total Lead Time Calculation: Since the longest lead time is 5 days (procuring new labels), it sets the minimum total lead time for creating a finished ink cartridge. This is because all other steps can occur in parallel or have lead times shorter than or equal to 5 days.
Therefore, if Bartran Company started with nothing in stock and initiated the process of creating an ink cartridge, it would take a minimum of 5 days to complete at least one finished ink cartridge.
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2. You have just completed an analysis of Rodriguez Manufacturing. You used the Capital Asset Pricing Model to determine that the required rate of return is 13%. The last dividend paid was $1.80, and the current price is $25. Based on new manufacturing processes that the company recently adopted and the company’s history of consistently paying dividends, you believe the company’s dividends will grow at a constant growth rate of 6%.
Answers
Answer:
You didn´t post the question complete. So I found the expected rate of return. Hope be useful.
Explanation:
Required rate of return on stock = 13%
Expected rate of return is calcualted below Using DDM model:
Expected rate of return = [$1.80 × (1 + 6%) / ($25)] + 6%
= ($1.908 / $25) + 6%
= 7.632% + 6%
= 13.632%
Expected rate of return is 13.632%.
On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.How much is the annual depreciation expense assuming use of the straight-line depreciation method?A. $6,100.B. $6,000.C. $5,950.D. $5,750.
Answers
Answer:
B. $6,000
Explanation:
The computation of the annual depreciation expense under the straight-line method is shown below:
= (Original cost - residual value) ÷ (useful life)
= ($41,000 - $5,000) ÷ (6 years)
= ($36,000) ÷ (6 years)
= $6,000
The original cost is computed below:
= Purchase value + transportation and installation cost
= $40,000 + $1,000
= $41,000
Both assets A and B plot on the SML. Asset A has an expected return of 15% and a beta of 1.7, and asset B has an expected return of 12% and a beta of 1.1. What is the risk-free rate of return?
a. 5.0%
b. 6.5%
c. 11.5%
d. It cannot be determined from this information
Answers
Final answer:
By setting up two equations based on the CAPM formula and the provided expected returns and betas for assets A and B, we solve for the risk-free rate of return, which is found to be 5.0%. The correct answer is option (A)
Explanation:
The Security Market Line (SML) depicts the relationship between an asset's expected return and its beta with respect to the market. It is based on the Capital Asset Pricing Model (CAPM), which is defined as:
Expected Return = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)
Based on the information given for assets A and B, we can set up two equations using their expected returns and betas:
1. 0.15 = Risk-Free Rate + 1.7 x (Market Return - Risk-Free Rate) for Asset A
2. 0.12 = Risk-Free Rate + 1.1 x (Market Return - Risk-Free Rate) for Asset B
To find the Risk-Free Rate, we have a system of two equations with two unknowns (Risk-Free Rate and Market Return). Solving this system algebraically:
Isolate the Risk-Free Rate terms on one side and simplify the equations.Find the value of Market Return by solving any of the equations.Substitute the value of Market Return back into either equation to find the Risk-Free Rate.After solving, we find that the risk-free rate of return is 5.0% (Option a).
An owner lists his home and agrees to pay a 6% commission provided he nets $10,000 after paying the commission and the balance of his mortgage, which is $75,000. To the nearest dollar, what should the selling price be to net the owner his $10,000?
Answers
Answer:
selling price is $90425.53
Explanation:
GIVEN DATA:
Commission 6%
net funds $10,000
mortgage is $75,000
Required selling price is given as
[tex]= \frac{Net\ funds\ required}{1 - commission}[/tex]
[tex]= \frac{10,000 + 75000}{1 - 0.06}[/tex]
[tex]=\frac{85000}{0.94}[/tex]
=$90425.53
selling price is $90425.53
To find the selling price that will net the owner $10,000, subtract the commission and mortgage balance from the selling price and solve for x. The selling price should be $90,425.
Explanation:To find the selling price that will net the owner $10,000, we need to take into account the 6% commission and the balance of the mortgage. Let's represent the selling price as x. The commission would be 0.06x, and the balance of the mortgage is $75,000. So, the equation we can set up is:
x - 0.06x - $75,000 = $10,000
To solve for x, we can combine like terms:
0.94x - $75,000 = $10,000
Then, we can isolate x by adding $75,000 to both sides:
0.94x = $85,000
Dividing both sides by 0.94:
x = $90,425
Therefore, the selling price should be $90,425 to net the owner $10,000.
On January 1, Year 1, McClurg Corporation issues 5%, 11-year bonds with a face amount of $70,000 for $76,180. The market interest rate is 4%. Interest is paid semiannually on June 30 and December 31. Complete the necessary journal entry for the issuance of the bonds by selecting the account names from the drop-down menus and entering the associated dollar amounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answers
Answer:
The journal entry for the issuance of the bond is shown below:
Explanation:
The entry to be posted on Jan 1
Cash A/c..............................................Dr $76,180
Premium on bonds payable A/c........Cr $6,180
Bonds Payable A/c..................................Cr $70,000
As bonds issued, so cash is increasing and any increase in cash is debited. Therefore, the cash account is debited. But the bonds issued at a premium so the premium on the bonds payable will be credited. And bonds payable account is credited.
The journal entry to record the issuance of the bonds would be: Debit Cash $76,180, Credit Bonds Payable $70,000, Credit Premium on Bonds Payable $6,180.
Explanation:To record the issuance of the bonds, the journal entry would be as follows:
Debit: Cash $76,180Credit: Bonds Payable $70,000Credit: Premium on Bonds Payable $6,180The debit to Cash represents the amount received from the issuance of the bonds. The credit to Bonds Payable represents the face value of the bonds. The credit to Premium on Bonds Payable represents the difference between the face value of the bonds and the amount received, which is recorded as a liability on the balance sheet.
What is credit??????
Answers
Answer:
Credit is the provision of money or bills, based on a loan agreement between the bank and another party that requires the borrower to carry out the amount of interest in return
Note :
Sorry if my English ia a mess. becaues, I can't speak English
Credit:
Credit is the customer's ability to obtain services or goods before payment, based on the confidence that money to be paid will be made by him/her in the future.
In accounts, credit in an entry recording is a sum received listed on the right-hand side or column of an account.
Your financial power is part of the credit. You get what you need today, such as a car loan or a credit card, depending on the assurance that you can pay later. Planning to strengthen your mortgage helps ensure that you apply for credit if you need it.
Your statement is the basis for determining your credit score by the various financial reporting agencies that the borrowers use to assess your value of loan.
Bank of America, TransUnion and Equifax are three major national credit service companies.
Which one of the following stocks is correctly priced if the risk-free rate of return is 2.4 percent and the market risk premium is 7.80 percent? Stock Beta Expected Return A 0.72 8.43% B 1.48 14.00% C 1.40 13.32% D 1.06 10.58%
Answers
Answer:
Stock C
Explanation:
In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below
Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)
The (Market rate of return - Risk-free rate of return) is also called market risk premium
For Stock A
= 2.4% + 0.72 × 7.80%
= 2.4% + 5.616%
= 8.016%
For Stock B
= 2.4% + 1,48 × 7.80%
= 2.4% + 11.544%
= 13.944%
For Stock C
= 2.4% + 1.40 × 7.80%
= 2.4% + 10.92%
= 13.32%
For Stock D
= 2.4% + 1.06 × 7.80%
= 2.4% + 8.268%
= 10.668%
Since we see that the expected rate of return for stock C is equal to the expected rate of return so the stock C is correctly priced
The risk premium of a security is determined by its ________ risk and does not depend on its
________ risk.
A) systematic, undiversifiable
B) systematic, unsystematic
C) undiversifiable, diversifiable
D) diversifiable, undiversifiable
Answers
Answer: (B) Systematic, Unsystematic
Explanation:
The systematic risk is one of the type of investment and it is measured by investment return covariance in the market. The systematic risk is basically divided by market risk once it is calculated.
The premium risk of the security is mainly determine by the systematic risk and it is not depend upon its unsystematic risk.
The unsystematic risks is basically inherited from the specific industry and the risk can be reduced by the diversification.
Therefore, Option (B) is correct.
The Edward Company is expected to pay a dividend of D1 = $3.00 per share at the end of the year, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.15, the market risk premium is 5.50%, and the risk-free rate is 4.00%. What is the company's current stock price?
Answers
Answer
The answer and procedures of the exercise are attached in the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
A machine that cost $192,000 has an estimated residual value of $24,000 and an estimated useful life of 24,000 machine hours. The company uses units-of-production depreciation and ran the machine 6,000 hours in year 1, 7,000 hours in year 2, and 8,000 hours in year 3.
Answers
The book value of the machine at the end of year 3, using the units-of-production depreciation method, is $144,000. This is calculated based on the machine's actual usage of 8,000 hours in year 3.
To calculate the book value at the end of year 3 using the units-of-production depreciation method, we'll follow these steps:
1. Determine the depreciation per machine hour:
[tex]\[\text{Depreciation per Hour} = \frac{\text{Cost} - \text{Residual Value}}{\text{Total Estimated Machine Hours}}\][/tex]
2. Calculate the accumulated depreciation for each year:
[tex]\[\text{Accumulated Depreciation} = \text{Depreciation per Hour} \times \text{Actual Machine Hours}\][/tex]
3. Determine the book value at the end of each year:
[tex]\[\text{Book Value} = \text{Cost} - \text{Accumulated Depreciation}\][/tex]
Let's calculate it:
Given:
- Cost = $192,000
- Residual Value = $24,000
- Estimated Useful Life = 24,000 machine hours
- Actual Machine Hours in Year 1 = 6,000 hours
- Actual Machine Hours in Year 2 = 7,000 hours
- Actual Machine Hours in Year 3 = 8,000 hours
1.
[tex]\[\text{Depreciation per Hour} = \frac{192,000 - 24,000}{24,000 \text{ hours}} = 6[/tex]
2.
[tex]\[\text{Accumulated Depreciation Year 1} = $6 \times 6,000 \text{ hours} = $36,000\\\text{Accumulated Depreciation Year 2} = $6 \times 7,000 \text{ hours} = $42,000\\\text{Accumulated Depreciation Year 3} = $6 \times 8,000 \text{ hours} = $48,000[/tex]
3.
[tex]\text{Book Value Year 1} = $192,000 - $36,000 = $156,000\\\text{Book Value Year 2} = $192,000 - $42,000 = $150,000\\\text{Book Value Year 3} = $192,000 - $48,000 = $144,000[/tex]
Therefore, the book value at the end of year 3 is $144,000.
The complete question is:
A machine that cost $192,000 has an estimated residual value of $24,000 and an estimated useful life of 24,000 machine hours. The company uses units-of-production depreciation and ran the machine 6,000 hours in year 1, 7,000 hours in year 2, and 8,000 hours in year 3.
Calculate its book value at the end of year 3.
Consider the following statement: "The Fed has an easy job. Say it wants to increase real GDP by $200 billion. All it has to do is increase the money supply by that amount." The statement is ▼ correct incorrect because an increase in the money supply ▼ does does not affect real GDP directly.
Answers
Answer:
The statement is incorrect
Explanation:
As the statement correctly describes, the money supply does not directly affect real GDP, what it affects directly is the interest rate, and the inflation rate, which are monetary variables, while GDP is a variable that measures output.
When the Fed increases the money supply, it may be doing so with the hope of stimulating economic activity, and thus, increasing GDP, but the Fed knows that any effect will be indirect. What will happen under this expansionary monetary policy is that the interest rate will fall, and as it falls, the supply of loans will grow, investment will become cheaper, and more investment means more factors of production, or more productivity, which in turn, increase the real GDP, but as it can be seen, the effect is indirect.
In fact, if the FED goes overboard with increasing the money supply, it may cause high inflation or even hyperinflation, and these events actually lead to less investment, less saving, and less economic activity, resulting in a probable stagnation or contraction of GDP.
ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for $36,000 in cash. The incremental value of the acquisition is $3,000. What is the net present value of acquiring ABC to XYZ?
Answers
Answer:
$2,000
Explanation:
The computation of the net present value is shown below:
= Number of outstanding shares × market price per share + incremental value of the acquisition - acquired value in cash
= 1,750 shares × $20 + $3,000 - $36,000
= $35,000 + $3,000 - $36,000
= $2,000
All other information which is given is not relevant. Hence, ignored it
X Company purchased a patent on January 3, 2017 from Y Company for $145,000. An attorney drew up the contract between X & Y at a total cost of $15,000, which was split equally by the parties. The patent had a carrying value of $90,000 on Y’s books. X expects to be able to benefit from the patent for 10 years, after which it is expected to be of little to no value. What will be the carrying value of the patent on X Company’s December 31, 2018 balance sheet?
Answers
Answer:
$122,000
Explanation:
Cost of Patent:
= Cost of patent + (total cost ÷ 2)
= 145,000 + (15,000 ÷ 2)
= $152,500
Accumulated depreciation for 2 years:
= (Cost of Patent ÷ Benefited years) × No. of years
= (152,500 ÷ 10) × 2
= $30,500
Carrying value on December 31,2018:
= Cost of Patent - Accumulated depreciation for 2 years
= $152,500 - $30,500
= $122,000
Crane Corporation is projecting a cash balance of $33,900 in its December 31, 2019, balance sheet. Crane’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $209,050. The schedule of expected payments for direct materials for the first quarter of 2020 shows total payments of $48,590. Other information gathered for the first quarter of 2020 is: sale of equipment $3,390; direct labor $79,100, manufacturing overhead $39,550, selling and administrative expenses $50,850; and purchase of securities $15,820. Crane wants to maintain a balance of at least $28,250 cash at the end of each quarter. Prepare a cash budget for the first quarter.
Answers
Answer:
Total cash required= (15,820)
Explanation:
Giving the following information:
Crane Corporation is projecting a cash balance of $33,900 in its December 31, 2019, balance sheet. Crane’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $209,050. The schedule of expected payments for direct materials for the first quarter of 2020 shows total payments of $48,590. Other information gathered for the first quarter of 2020 is: sale of equipment $3,390; direct labor $79,100, manufacturing overhead $39,550, selling and administrative expenses $50,850; and purchase of securities $15,820. Crane wants to maintain a balance of at least $28,250 cash at the end of each quarter.
Cash budget:
From last year= 33,900
Collections= 209,050
Direct material= (48,590)
Equipment= 3,390
Direct labor= (79,100)
Overhead= (39,550)
Selling and administrative expenses= (50,850)
Securities= (15,820)
Ending inventory= (28,250)
Total= (15,820)
At December 31, 2012 and 2013, Plank Corp. had outstanding 3,000 shares of $100 par value 8% cumulative preferred stock and 15,000 shares of $10 par value common stock. At December 31, 2012, dividends in arrears on the preferred stock were $12,000. Cash dividends declared in 2013 totaled $45,000. What amounts were payable on each class of stock?Preferred Stock Common Stock
Answers
Answer:
Preference shareholders = $36,000
Equity shareholders = $9,000
Explanation:
As provided the outstanding preference dividend at end of 2012 = $12,000
Total cash dividends declared = $45,000 in the year 2013
Regular preference dividends = $100 [tex]\times[/tex] 3,000 [tex]\times[/tex] 8% = $24,000
Thus, when dividends will be paid in 2013 then firstly they will be used for payment to preference shareholders.
Thus, the company shall pay:
$12,000 + $24,000 = $36,000 to preference shareholders.
Further the balance will be paid to equity shareholders.
= $45,000 - $36,000 = $9,000
Hannah Township has a General Fund, two Capital Projects Funds, one Permanent Fund, two Enterprise Funds, two Internal Service Funds, three Pension Trust Funds, and one Private-Purpose Trust Fund. Assuming all governmental and enterprise funds meet the major fund criteria, how many columns will the proprietary fund statement of net position have? Select one: a. Two (2). b. Three (3). c. Four (4). d. Five (5).
Answers
Answer:
c. Four (4)
Explanation:
Ann would like to buy a house. It costs $2,500,000. Her down payment will be $50,000. She will take out a mortgage for the remainder. It will be a 30 year, fully amortizing, FRM, with constant monthly payments and monthly compounding. The annual interest rate is 4.00%. She will pay $5,000 in closing costs at origination. She will also pay 1.75% of the balance in buy-down points at origination. Note: the home is bought and the loan is taken in month 0, the first payment is due in month
1. In the spreadsheet where it says "cash inflow", "outflow" and "net cash flow" you should only take into account cash flow related to the mortgage.
2. Fill in the spreadsheet (sheet "FA AMORTIZATION SCHEDULE") for Ann. (It is called an amortization schedule or amortization calendar.)
3. Compute Ann's annualized IRR for the mortgage in the spreadsheet. (Use the net cash flow.)
(3.a) What is the annualized IRR for the mortgage?
(3.b) Is it higher or lower than the mortgage contract rate?
(3.c) Why? in excel
Answers
Answer:
Please find the cash flow calculation in the excel attached
Explanation:
The Equated Monthly Installment (Monthly payment is calculated based on the fact that there is a balloon payment at the end of the term.
3b)IRR is lower than the
mortgage contract rate
3c) The reason for lower IRR is the inclusion of Balloon Payment
Please find the cash flow calculation:-